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What Physicians Should Know about Non-Compete Clauses


What do physicians have to know about non-compete clauses in their contracts? Here's some information on the common contract device.

In the Mediterranean, around the year 1200, the Fourth Crusade sacked Constantinople, sending skilled glass makers on a quest for a safer place to work. Many landed in Venice, where work could easily be found.  Employers, probably for the purpose of protecting the city from fire, decided it would be safest to congregate these skilled laborers on the Isle of Murano. 

Sequestration had an unintended consequence. By the 1500s, Venetian artisans had learned from each other and perfected the process to gain control over the color and transparency of their glass, and had also mastered many new decorative techniques. Their skill became was so valuable, employers bent on monopolizing the trade, issued the order that the glass makers were not allowed to leave the island republic or they'd be sentenced to death. Workers may have believed they created the skill and therefore, should have the right to mobility; while employers believed they owned the right to the knowledge and all the income flowing from this know how.

This history perfectly illustrates the motivations behind modern covenants not to compete, which many physicians are asked to sign as a condition of employment.

In my experience employees, likely as not, aren’t running toward a fantastic new job, as much as running away from an intolerable old one. Physicians, like the Venetian glass makers, possess a skill the new employer would like to monopolize. However, physicians, particularly those who transfer from some other place, are less likely to have business contacts and patients of their own. Thus, they have  little leverage or power in negotiating the conditions of employment. I find many physicians are willing to sign anything placed in front of them.   In order to protect themselves from competition from departing employees, most employment contracts contain some form of non-compete clause (assuming non-competes are legal in your state.)

As a general rule, in the United States, non-competes arethought to be a restraint of trade and disfavored.  Employees have a right to work and the economy benefits from free mobility. However, another principle of contract law holds that if an adult is willing to give up a right by contract, the courts should not stand in the way of freedom to contract, unless the contract violates a statute or public policy.

Whether or not the law of a particular state will uphold a non-compete, depends on the law of each  state. In Texas, for example, a non-compete clause is enforceable if it meets the statutory requirements under the Business & Commerce Code  Section 15.50.  Among other things, the non-compete must be a part of an enforceable contract, and there must be some consideration given for the physician’s signing a contract which waives the physician’s right to compete in a free market. Often, this “consideration” takes the form of imparting “confidential information,” such as the list of patients given by the employer to the doctor.  The agreement must be limited to a reasonable time (such as 1-2 years) and must be limited in geography-usually 20-30 miles from where the physician formerly practice  (the entire United States is too large a proscriptive area). Finally, in Texas, a physician non-compete must contain a buyout clause, allowing the physician to buy himself out of the non-compete. 

Physicians, rather than attempt this on your own, would be wise to hire an experienced healthcare attorney to assist with the terms of the agreement. This is no time to sign whatever is placed in front of you by a friendly hospital human resources manager. 


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